E. Automatic Bankruptcy through Failure of a Commercial Proposal

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 74-74

Page 74

FAILURE OF A COMMERCIAL PROPOSAL

A bankruptcy can also come about automatically without the intervention of either the creditor or the debtor. This occurs when an attempt by the debtor to reach a commercial proposal with the creditors fails. This can happen if the cash flow statements and associated documents or the proposal are not filed within the time periods set out in the statute,¹⁷⁰ if the creditors vote down the proposal¹⁷¹or are deemed to have done so,¹⁷²if a court decides not to approve the proposal,¹⁷³or if a court later annuls it.¹⁷⁴Once one of these events occurs, the debtor is deemed by the statute to have made an assignment at the time of the occurrence of that event. There is no similar provision in the Companies Creditors’ Arrangement Act providing for automatic bankruptcy in the event that a corporate restructuring fails under that statute.

[170] BIA, above note 1, s. 50.4(8).

[171] Ibid., s. 57.

[172] Ibid., ss. 50(12.1) and 57.

[173] Ibid., s. 61(2).

[174] Ibid., s. 63(4).